In my early October quarterly report on the grain and oilseed futures markets, I concluded:
Commodity prices are cyclical. They rise to levels where production increases, inventories grow, and consumer demand declines. They fall to levels where production declines, inventories contract, and consumer demand increases. As the markets head towards 2025 and a new crop year. As the markets finish the 2024 harvest and head for the 2025 crop year, the cure for the current low price levels could be those low prices. I believe grain and oilseed market prices have limited downside and significant upside potential. Worldwide demand continues to grow, with the over eight billion global population. The uncertainty of the weather conditions in the critical growing regions and the ongoing conflict in Ukraine could cause prices to recover, perhaps dramatically, in the future. I favor long risk positions at the current price levels, leaving room to add on further declines.
In late December, the active month CBOT soybean and wheat prices were lower, while corn prices were higher. However, prices remain near lows and could be in the buy zone for 2025. The latest WASDE report shows that the supplies from the 2024 crop were ample to meet the worldwide demand. The full text of the December WASDE report is available through this link.
Beans are trading sideways near the lows
In February 2022, the continuous CBOT soybean futures contract came within 29.75 cents of the 2012 $17.89 all-time high after Russia invaded Ukraine.
The monthly continuous contract chart shows the 2022 high and the subsequent price plunge, which brought the beans below $10 per bushel in 2024.
The daily January soybean futures chart illustrates the oilseed futures are trading in a sideways consolidation pattern below $10 per bushel in December 2024.
Corn- A slightly bullish consolidation pattern
In April 2022, the continuous CBOT corn futures contract came within 24.50 cents of the 2012 $8.49 all-time high after Russia’s invasion of Ukraine.
The monthly continuous contract corn futures chart shows the price plunge that took nearby corn futures to a $3.85 per bushel low in August 2024.
While the long-term chart remains in a bearish trend, the daily chart of corn for March 2025 delivery has made higher lows and higher highs since August 2024.
Wheat remains bearish
Corn and beans came within striking distance of record highs in 2022, while CBOT soft red winter wheat futures reached an all-time high. Russia and Ukraine are significant wheat-producing and exporting countries.
The long-term continuous quarterly chart of nearby CBOT wheat futures illustrates the move to the 2022 record peak and the correction that took wheat prices below $6 per bushel in 2024.
Prospects for peace in Ukraine versus U.S. tariffs in 2025
Over the past years, good weather conditions and ample supplies of soybeans, corn, and wheat have weighed on agricultural futures prices. Grains and oilseeds are trading sideways, much closer to the lows than the 2022 highs in late 2024 after the 2024 harvest.
As the grain and oilseed markets that feed and increasingly fuel the world move into 2025, two factors could continue to weigh on prices.
The prospects for a solution to the ongoing war in Ukraine are increasing as President-elect Trump has pledged to stop the conflict. A solution would remove some supply fears surrounding Europe’s breadbasket in Russia and Ukraine, which could increase supplies and weigh further on prices.
Meanwhile, the threat of tariffs under the incoming administration could threaten U.S. corn and soybean exports to China. The U.S. is a world leader in the producer and export of corn and oilseeds. The tariffs could lead to U.S. supply gluts and lower prices.
However, weather is always the critical factor for the path of least resistance of agricultural commodity prices. As we have witnessed in the soft commodities sector, weather-related issues in cocoa in West Africa and coffee and oranges in Brazil have led to record highs in the three agricultural products. Therefore, corn, beans, and wheat will be susceptible to any weather-related issues or crop diseases in 2025, which could lead to higher prices.
Moreover, with the global population growing, the demand side of the fundamental equations for the grains and oilseeds means that each year, producers need to increase output to meet the increasing worldwide requirements.
The SOYB, CORN, and WEAT ETFs could offer value with limited downside for the coming year
Soybean, corn, and wheat prices remain under pressure in late 2024. However, with prices trading near the recent lows, the downside risk for 2025 could be limited.
The most direct route for risk positions in the leading grain and oilseed markets are the futures and futures options on the Chicago Mercantile Exchange’s CBOT division. The Teucrium family of agricultural ETF products provides an alternative for market participants seeking exposure to the markets that feed and increasingly fuel the world. Corn is a leading ingredient in ethanol production, and soybeans are required for biodiesel refining.
- At $20.76 per share, the Teucrium Soybean ETF product (SOYB) had $27.5 million in assets under management. SOYB trades an average of over 26,000 shares daily and charges a 0.24% management fee.
- At $18.36 per share, the Teucrium Corn ETF product (CORN) had over $63.25 million in assets under management. CORN trades an average of 52,462 shares daily and charges a 0.25% management fee.
- At $4.70 per share, the Teucrium Wheat ETF product (WEAT) ) had over $118.33 million in assets under management. WEAT trades an average of over 594,000 shares daily and charges a 0.22% management fee.
The grain and oilseed markets remain in bearish long-term trends, but they are close to recent lows, and the uncertainty of weather conditions during the 2025 crop year could lift prices early next year. Moreover, any issues that reduce supplies as the demand increases could cause explosive rallies. At the current price levels, risk-reward dynamics could favor the upside for the coming year. To mitigate roll risks, the SOYB, CORN, and WEAT ETF products own three liquid CBOT futures contracts, excluding the nearby contract. The ETFs tend to underperform the grain and oilseed futures nearby futures contracts on the upside, but also outperform during downside corrections as the most speculative activity tends to occur in the nearby futures month.
After the price carnage from the 2022 highs, some exposure to corn, soybean, and wheat prices could make sense. Prices often rally when markets look like there is no chance of a recovery. Commodity prices are cyclical, and the grain and oilseed futures are close to the bottom of the price cycle after reaching the top in 2022.
